Facebook’s Whatsapp Acquisition Worth $19 Billion?

February 22, 2014

Social networking giants Facebook have struck a deal to buy mobile messaging company WhatsApp for $19 billion. This is one of the biggest deals for acquiring a startup company. This move will strengthen Facebook exsisting stronghold on the social media market. According to conditions WhatsApp CEO and co-founder Jan Koum will join the Board of Directors and all the employee will join Facebook.

As per the terms of the deal Facebook will pay $4 billion in cash, shares worth about $12 billion and $3 billion worth stocks will be given to WhatsApp founders and staff. WhatsApp is one of the most used mobile messaging app and it uses mobile broadband to send messages using one’s cellphone number. It has 450 million people using it every month and adds about million users everyday. WhatsApp has shown tremendous growth in the last few years which even eclipse the growth of Facebook in its formative years. According to Facebook CEO Mark Zuckerberg this deal aims to ‘connect people’s worlds’. Facebook intends to keep WhastApp as an independent company just like it did with Instagram.

Lets have a look why this will be a blockbuster deal for Facebook and its worth every penny spent.

User base

WhatsApp has a active user base of 450 million with 1 million users being added everyday. This trend will surely be on the up as Facebook looks to build an integrated social network on mobile. This deal will bring the three most used mobile apps Facebook, WhatsApp and Instagram under the wings of Facebook continuing their monopoly in the social networking world.

No Ads but Marketing?

WhatsApp has a strict policy of no ads and gimmicks to provide users with a purely messaging experience and Facebook intends to stick with it. But Facebook may use the messages to provide services to users. Like it can use keywords from texts eg Pizza and they will alert pizza joints who will provide you their latest specialty.

A new venture into the mobile world

Mobiles have become the central part of a person’s social life and Facebook’s previous tries to enter into mobile world have produced mixed results. Facebook chat didn’t perform as well as people expected. But WhatsApp can be the answer to this problem. It will not only provide a popular mobile messaging service but one that is highly popular in the emerging markets.

Future money generating potential

WhatsApp if properly managed can generate lots of revenue. Presently WhatsApp earns about €15 million per year just through its yearly subscription fees. It provides various scope for development which is sure to draw in a lot of cash. But this will require time and Facebook team is the best in the business to take this company forward.

This recently concluded deal will be a highly debated point in coming weeks due to its high price tag. But we must consider the fact that Facebook doesn’t have control over a mobile platform like its rival Google has with Android. This move will boost the company’s credentials as it is reported that Google was ready to offer $10 billion to acquire WhatsApp. So Mr. Zuckerberg its money well spent.